If you are a first time credit card user, you are unlikely to benefit from even the best balance transfer credit cards. After all, the main feature of this type of plastic is a low or zero introductory APR that is applied to your balance transfers.
Hence, another credit card account (or accounts) with an outstanding balance is required to maximize the features of this card. This will allow you to transfer your balance from a high APR card to this one offering low or zero APR for an introductory period. In so doing, you save on interest.
Other Features to Consider in Balance Transfer Offers
Balance transfer credit cards are not the same, and the different features must be looked into in order to determine the most suitable offer. Among these are as follows:
1. The required credit rating. The best balance transfer credit cards are reserved only for those with good to excellent credit standing. This means having a FICO score of 750 or higher. If you are one of the lucky few, you may avail of zero introductory APR for the longest period, which is usually 18 months. You will likely be offered a high credit limit, and you may not be levied a balance transfer fee or annual fee. However for the majority, who has less than sterling credit score, a less attractive package is offered.
2. The rate during the introductory period and the regular APR that will apply when the period expires. Since your intention is to minimize your interest expense, the former should be zero (or very low) and the latter less than 20%. Do your math in order to determine if you will be better off transferring your balance.
3. The length of the introductory period. In order to maximize your savings in interest, the longer the introductory period the better. As mentioned this may extend to 18 months for those with exemplary credit standing. However, it may be as short as 3 to 6 months for those with lower credit score.
4. Consider the other fees and charges. These are the balance transfer fee, annual fee, and other charges that add up to the effective cost of money. The balance transfer fee may be as much as 5% of the amount transferred and the annual fee may be a substantial amount as well. These charges are paid up front, hence increasing your outstanding balance and your financial burden.
5. The credit limit. Ideally, this should far exceed the amount that you plan to transfer. Having a limit that is less will not allow you a total transfer of your outstanding debt, and it may complicate your financial management. While having a maximum that barely covers your balance is likely to have a negative impact on your credit score.
Find Out More about Balance Transfer Offers
If properly utilized, balance transfer credit cards provide significant benefits in terms of reducing interest expense. However, given the plethora of offers in the market, it is best to compare offers in order to choose the most suitable one, and credit-land.com offers useful information in this regard.
Published in: Personal Finance